Performance Management in Context:

Overview

.
Herman Aguinis, University of Colorado at Denver
 Chapter Outline
 Definition of Performance Management (PM)
 The Performance Management Contribution
 Disadvantages/Dangers of Poorly-implemented PM
systems
 Definition of Reward Systems
 Aims and role of PM Systems
 Characteristics of an Ideal PM system
 Integration with Other Human Resources and
Development Activities

.
Herman Aguinis, University of Colorado at Denver
 Performance Management: Definition
Continuous Process of
Identifying performance of individuals and teams
Measuring performance of individuals and teams
Developing performance of individuals and teams
and
Aligning performance with the strategic goals of
the organization

.
Herman Aguinis, University of Colorado at Denver
 Performance Management
vs.
Performance Appraisal

.
Herman Aguinis, University of Colorado at Denver
 PM is NOT performance appraisal
 Performance  Performance appraisal
Management  Assesses employee
 Strategic business Strengths &
considerations Weaknesses
 Ongoing feedback So  Once a year
employee can improve  Lacks ongoing
performance feedback
 Driven by line manager  Driven by HR

.
Herman Aguinis, University of Colorado at Denver
 Contributions of PM Systems

For Managers
For Organization
For Employees
Supervisors’ views of
performance are
Organizational goals are
The definitions of job and communicated more clearly
made clear
success are clarified Managers gain insight about
Organizational change is
Motivation to perform is subordinates
facilitated
increased There is better and more
Administrative actions are
Self-esteem is increased timely differentiation
more fair and appropriate
Self-insight and development between good and poor
performers There is better protection
and enhanced
from lawsuits
Employees become more
competent
.
Herman Aguinis, University of Colorado at Denver
 Disadvantages/Dangers of
Poorly-implemented PM Systems

For Managers
For Employees
For Organization
Increased turnover
Lowered self-esteem
Decreased motivation Wasted time and
Employee burnout and money
to perform
job dissatisfaction
Unjustified demands Unclear ratings system
Damaged relationships
on managers’ Emerging biases
Use of false or resources Increased risk of
misleading
Varying and unfair litigation
information
standards and ratings
.
Herman Aguinis, University of Colorado at Denver
 Reward Systems: Definition
Set of mechanisms for distributing

 Tangible returns
and
 Intangible or relational returns

As part of an employment relationship

.
Herman Aguinis, University of Colorado at Denver
 Tangible returns
 Cash compensation
Base pay
Hourly wages, Salary
Cost-of-Living Adjustment (COLA)
To combat the effect of inflation in an attempt to preserve the
employee buying power
Contingent Pay/ Merit Pay
Additional pay based on employee level of performance
Incentives (short- and long-term )
bonuses (short term) or stock options/ownership (long term)
.
Herman Aguinis, University of Colorado at Denver
Tangible returns
 Benefits, such as
 Income Protection Program
Serve as a Backup to employee salaries in the event when employee is sick,
disabled, or no longer able to work .
E.g. Disability pay, medical insurance, pension plans, savings plans.

In fact, a recent survey including both employees in general and HR professionals in particular showed
that health care/medical insurance is the most important benefit, followed by paid time off and retirement
benefits

 Allowances
E.g., housing, transportation, mobile , gym facility, phone bills.

 Work/life focus
E.g., vacation time, counseling, financial planning, flexible work schedules (e.g.,
telecommuting, non-paid time off).
.
Herman Aguinis, University of Colorado at Denver
 Intangible returns
 Relational returns, such as

 Recognition and status

 Employment security
 Challenging work
 Learning opportunities

.
Herman Aguinis, University of Colorado at Denver
Returns and Their Degree of Dependency on the
Performance Management System

Returns Degree of Dependency

Return Degree of Dependency
 Cost of Living Adjustment  Low
 Income Protection  Low
 Work/life Focus  Moderate
 Allowances  Moderate
 Relational Returns  Moderate
 Base Pay  Moderate
 Contingent Pay  High
 Short-term Incentives  High
 Long-term Incentives  High

.
Herman Aguinis, University of Colorado at Denver
 Role of PM Systems

.
Herman Aguinis, University of Colorado at Denver
 Strategic Purpose

• To help top management achieve strategic business objectives

Administrative Purpose

• To furnish valid and useful information for making administrative decisions about
employees

Informational Purpose

• To inform employees about how they are doing and about the organization's and the
supervisor’s expectations

Developmental Purpose

• To allow managers to provide coaching to their employees

Organizational maintenance Purpose

• To provide information to be used in workplace planning and allocation of human resources

Documentation Purpose

• To collect useful information that can be used for various purposes (e.g., test development,
. personnel decisions)
Herman Aguinis, University of Colorado at Denver
 Strategic Purpose
By linking the organization's goals with individual goals,
the performance management system reinforces
behaviors consistent with the attainment of
organizational goals.

Onboarding refer to the processes that help the new

employee from being Organizational outsider to
organizational insider.

.
Herman Aguinis, University of Colorado at Denver
 Administrative Purpose
To furnish valid and useful information for making administrative decisions
about employees.
Such administrative decisions include-:
Salary adjustments
Promotions
Retention or termination
Recognition of individual performance
Identification of poor performers
Layoffs
Merit

.
Herman Aguinis, University of Colorado at Denver
 Informational Purpose
“serve as an important communication device.”

 First, they inform employees about how they are doing, and provide them with
information on specific areas that may need improvement.

 Second, related to the strategic purpose, they provide information regarding the
organisation’s and the supervisor’s expectations, and what aspects of work the
supervisor believes are most important.

 Third, How they can improve their performance

.
Herman Aguinis, University of Colorado at Denver
 Developmental Purpose
Developmental purpose refers to both short-term and long-term
development aspects.

 Performance feedback/coaching
 Identification of individual strengths and weaknesses
 Causes of performance deficiencies (which could be due to individual,
group or contextual factors).
 Tailor development of individual career path

.
Herman Aguinis, University of Colorado at Denver
 Organizational Maintenance Purpose
 Workforce planning
 Talent inventory, which is information on current resources (e.g., Skills, abilities,
promotional potential and assignment histories of current employees).
 Assess future training needs
 Evaluate performance at organizational level
 Evaluate effectiveness of HR interventions (e.g., Whether
 Employees perform at higher levels after participating in a training programme).

.
Herman Aguinis, University of Colorado at Denver
 Documentation Purpose

Validate selection instruments

Document administrative decisions
Help meet legal requirements

.
Herman Aguinis, University of Colorado at Denver
Characteristics of an Ideal PM System

Strategic congruence Thoroughness Practicality Meaningfulness

Identification of
effective and
Specificity Reliability Validity
ineffective
performance

Acceptability and
Inclusiveness Openness Correctability
fairness

Standardization Ethicality

.
Herman Aguinis, University of Colorado at Denver
Congruent with organizational strategy
 Consistent with organization’s strategy
 Aligned with unit and organizational goals

Thorough
• All employees are evaluated
• All major job responsibilities are evaluated
• Evaluations cover performance for entire review
period
• Feedback is given on both positive and negative
performance

Herman Aguinis, University of Colorado at Denver

Practical
 Available
 Easy to use
 Acceptable to decision makers
 Benefits costs

Meaningful
• Standards are important and relevant
• System measures ONLY what employee can control
• Results have consequences Evaluations occur regularly and
at appropriate times
• System provides for continuing skill development of
evaluators
.
Herman Aguinis, University of Colorado at Denver
Specific
Concrete and detailed guidance to employees
what’s expected
how to meet the expectations

Identifies effective and ineffective performance

• Distinguish between effective and ineffective
– Behaviors
– Results
• Provide ability to identify employees with
various levels of performance
.
Herman Aguinis, University of Colorado at Denver
Reliable
 Consistent
 Free of error
 Inter-rater reliability

Valid
• Relevant (measures what is important)
• Not deficient (doesn’t measure
unimportant facets of job)
• Not contaminated (only measures what
the employee can control)

.
Herman Aguinis, University of Colorado at Denver
Acceptable and Fair

 Perception of Distributive Justice

Work performed  evaluation received 
reward

 Perception of Procedural Justice

Fairness of procedures used to:
Determine ratings
Link ratings to rewards

.
Herman Aguinis, University of Colorado at Denver
Inclusive
 Represents concerns of all involved

When system is created, employees should help

with deciding
What should be measured
How it should be measured

Employee should provide input on performance

prior to evaluation meeting

.
Herman Aguinis, University of Colorado at Denver
Open (No Secrets)
 Frequent, ongoing evaluations and feedback
 2-way communications in appraisal meeting
 Clear standards, ongoing communication
 Communications are factual, open, honest

Ethical
• Supervisor suppresses self-interest
• Supervisor rates only where she has sufficient
information about the performance dimension
• Supervisor respects employee privacy
.
Herman Aguinis, University of Colorado at Denver
Integration with other Human Resources
and Development activities

PM provides information for:

Development of training to meet
organizational needs
Workforce planning
Recruitment and hiring decisions
Development of compensation systems

.
Herman Aguinis, University of Colorado at Denver
.
Herman Aguinis, University of Colorado at Denver